BARK, Inc. Class A

Thank you for standing by and welcome to the BART second quarter fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Mike Mujas, VP of Investor Relations. You may begin.

Good morning, everyone, and welcome to BARC's second quarter fiscal year 2026 earnings call. Joining me today are Matt Meeker, co-founder and chief executive officer, and Zahir Ibrahim, chief financial officer. Today's conference call will be webcast in its entirety on our website, and a replay will be made available shortly after the call. Additionally, a press release covering the company's financial results was issued this morning and can be found on our investor relations website. Before I pass it over to Matt, I want to remind you of the following information regarding forward-looking statements. The statements made on today's call are based on management's current expectations and are subject to risks and uncertainties that could cause actual future results and outcomes to differ. Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes. We will also discuss certain non-GAAP financial measures on today's call. Reconciliation of our non-GAAP financial measures is contained in this morning's press release. And with that, I may now pass it over to Matt.

Thanks, Mike, and good morning, everyone. Midway through the year, we're on track with expectations and gaining confidence and momentum as we go. But first, I'm happy to start this call with an important update. Last week, we paid off our $45 million convertible note using cash from our balance sheet. Spark is now debt-free. We're proud of our decision and our ability to pay this off in cash rather than refinance it, which reflects our long-term confidence in the business. In addition, we extended our $35 million credit line with Western Alliance Bank, continuing a nearly decade-long partnership that gives us added flexibility on competitive terms. Together, these actions strengthen our balance sheet and position BARC to grow and create long-term value even in a volatile macro environment. Our confidence comes from how well we've executed on the plan we set at the start of the fiscal year. to drive revenue diversification and maintain bottom line discipline. This quarter reflects that progress with total revenue of $107 million above the high end of our guidance range and adjusted EBITDA of negative $1.4 million within our guidance range. Adjusted EBITDA would have been stronger, but we chose to invest roughly $1 million in incremental efficient growth during the quarter. and investment we expect will pay off as the year goes on. So let's talk about our progress this quarter on diversification and the bottom line. First, our commerce segment delivered another standout quarter with $24.8 million in revenue, up 6% year over year, and representing 24% of total revenue, an all-time high revenue mix contribution. Year to date, we're seeing strong traction across key partners, including Walmart, Chewy, Amazon, and Costco, where our popular advent calendar is already sold out for the holiday season. And speaking of Chewy and Amazon, you can now find our Bark in the Belly Kittle on both of their digital shelves following its August launch. Second, when it comes to diversification, Bark Air continues to exceed expectations, delivering $3.6 million in revenue this quarter Up more than 138% from last year. At 54% from the prior quarter. We also maintain the 99% five star review rate, which speaks volumes about the quality of experience we're delivering. This quarter we achieved our highest gross margin, driven by a 93% seat fill rate. Spark Air continues to validate the incredible demand for dog first travel. and reinforces our belief that we're solving a real problem for dog parents. And finally, as a reminder, we received the green light from the Girl Scouts to participate in their annual cookie program and will begin shipping products next summer. This partnership represents a huge opportunity, not just for revenue, but for awareness. Millions of families will see Bark alongside one of the most iconic brands in the country, And we're thrilled to partner with the Girl Scouts. Each of these are initiatives that only BARC can do. When we do BARC things, we excel. So we made great progress on diversification this quarter. Now let's talk about our bottom line performance. This has been a challenging year with tariffs, changes at the US Postal Service, and a volatile macro environment. But as planned, we're emerging stronger. A meaningful milestone this quarter was moving our last mile delivery to Amazon. That means your BarkBox now arrives on those Amazon blue trucks. We're off to a great start with this partnership, which reduces our last mile delivery costs and gets packages to customers about a day faster. That's a meaningful improvement to the customer experience. In addition, this quarter marked the lowest customer acquisition costs we've seen since fiscal 2023. And with that efficiency, we saw an opportunity to deploy an additional $1 million beyond our plan at a highly efficient rate to drive both short and long-term growth. And for the second quarter in a row, two-thirds of our new subscribers opted into our more premium Super Chewer and Combo Box offerings. On top of that, We've seen six consecutive months of improvement in subscriber retention as we continue to capitalize on the Shopify platform. One driver of that progress is finding new ways to deepen our relationship with dog parents and strengthen our core offering. Last month, we launched Bark Subscriber Perks, a new membership benefit that gives BarkBox subscribers access to exclusive discounts and offers from Bark and our partners delivering up to $1,500 in annual value at no additional cost. It's another way we're rewarding loyalty and adding everyday value for our most engaged customers. Bringing all of that together, we acquired more new subscribers than planned at our most efficient rate in several years. Those subscribers are retaining longer, and with partnerships like Amazon for Last Mile Delivery, They'll generate higher margins for us while enjoying an even better customer experience. Our brand now extends well beyond subscriptions to strong sales across 50,000 retail locations and record passengers and revenue for Bark Air. Finally, we feel so good about our performance that we paid off our convertible debt and cash ahead of schedule without refinancing or selling equity to do it. Our strategy is working. for balancing growth and profitability, expanding into new categories and channels, and doing it with a debt-free balance sheet. I'm excited about what's ahead in the second half of the fiscal year. And with that, I'll turn it over to Zaheer.